Better fund based on sharpe ratio & other details?

[shilpaks7]

if two funds had the following details which one is a better investment in the large cap category - fund 2 seems to be less volatile(lower beta) but fund 1 seems to be a better performer (due to higher alpha) right?

if i want to stay invested for about 5 years in this should i look at less volatility or better returns? pls help


R-Squared Alpha Beta Mean Std Dev Sharpe ratio
0.96 6.49 0.87 14.74 28.86 0.36 Fund 1
0.97 4.6 0.79 12.48 26.03 0.31 Fund 2

 

[Taurus1]

Volat/sharpe ratios/returns are just measurements of what it is now, not what it is going to be.
5 years down the line nobody knows what is going to happen. Your guess is as good as anyone elses.

 

[shilpaks7]

thank you taurus, but i was also asking if my analysis of alpha and beta are correct and if so then for a large cap fund what factors should one consider - lower volatility or higher returns?

 

[vikram112in2000]

Hi,

of all the risk related factors you have mentioned, i would say the 3 and 5 yr volatility (SD) of a fund are most important for gauging a fund's risk level.

As you say you want to be invested for the long haul, i would suggest you strike a balance between risk and returns. Since you want to be invested for many years, it would help to have a fund with low risk as this may help in better protection of capital when market is volatile. But the returns must also be decent for making the effort worthwhile. I would suggest you screen top ten funds in whichever category you want to and access their risk level. Sites like value research online, morningstar india can help in this regard. They also have their risk rating for funds.

Happy investing!

 

[Taurus1]

Shilpa, any analysis of alpha/beta comes into play only if you get the biggest factor right...........is the market going up or down. Personally, I would not put any money into the market now, it's better to wait for a couple of months and then decide.
In 5 years anything can happen, it is just too long to make any concrete statements about anything.
I would not even suggest mutual funds, why not learn to manage your money yourself?